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Vanguard to Merge 2 Funds, Liquidate Another

By Dinah Wisenberg Brin

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Vanguard plans to streamline its fund offerings by merging the Vanguard Managed Allocation Fund into the Vanguard LifeStrategy Moderate Growth Fund and liquidating the Vanguard Alternative Strategies Fund in this year’s second quarter.

“We strive to offer a broad lineup of investment solutions that meets the long-term needs of Vanguard’s diverse investor base,” Dan Reyes, who heads the Vanguard Portfolio Review Department, said Tuesday. “We continually monitor our funds to ensure that they’re serving our clients well, and we refine and evolve our lineup to better position investors to succeed.”

The investment giant cited limited investor demand and the opportunity to consolidate two funds with similar investment objectives in merging the Managed Allocation Fund into the LifeStrategy Moderate Growth Fund. The two funds offer similar asset class exposure with comparable asset allocations and similar risk profiles, while the LifeStrategy Moderate Growth Fund has a lower expense ratio. 

Managed Allocation Fund shareholders need not take action before the merger.

To prepare the Managed Allocation Fund for the merger, however, a portion of the fund’s assets will be sold, which will have tax consequences for certain shareholders depending on their individual tax situation.

This includes the liquidation of the Alternative Strategies Fund, an underlying investment of the Managed Allocation Fund. Any realized capital gains, including those resulting from shareholder redemptions, will be distributed to the shareholders of the Managed Allocation Fund before the merger, Vanguard said.

The Vanguard Alternative Strategies Fund was launched in 2015 to help investors further diversify beyond traditional asset classes while potentially lowering a portfolio’s volatility. The fund, however, has not gained broad acceptance among investors, Vanguard said.

Shareholders are being notified and will have the opportunity to exchange into another Vanguard fund or redeem shares prior to the liquidation date. The liquidation may have tax consequences for certain investors depending on their individual tax situation, Vanguard said.

(Image: Bloomberg)

Dinah Wisenberg Brin

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